TY - JOUR
T1 - Business environment trustworthiness and employee income share
AU - Bai, Min
AU - Li, Yue
AU - Yu, Chia-Feng
N1 - Publisher Copyright:
© 2025 Elsevier Inc.
PY - 2025/7
Y1 - 2025/7
N2 - Using China's social credit pilot program as a quasi-natural experiment and a sample of listed firms from 2011 to 2019, we provide robust evidence that employee income share rises as business environment trustworthiness improves. Notably, this increase is primarily driven by rank-and-file employees rather than executives. The mechanisms behind this trend include enhanced talent agglomeration, reduced agency problems, and eased financing constraints. The effect is more pronounced for firms facing greater competition, weaker corporate governance, poorer information environments, or located in less marketized regions. Further, the rise in employee income share positively impacts firms' future financial performance. These findings indicate that in a more trustworthy marketplace, where more customers and investors are likely to engage, firms—particularly those struggling to attract customers and investors—place greater value on rank-and-file employees and increase their income share. This behavior fosters employee reciprocity, leading to improved firm performance.
AB - Using China's social credit pilot program as a quasi-natural experiment and a sample of listed firms from 2011 to 2019, we provide robust evidence that employee income share rises as business environment trustworthiness improves. Notably, this increase is primarily driven by rank-and-file employees rather than executives. The mechanisms behind this trend include enhanced talent agglomeration, reduced agency problems, and eased financing constraints. The effect is more pronounced for firms facing greater competition, weaker corporate governance, poorer information environments, or located in less marketized regions. Further, the rise in employee income share positively impacts firms' future financial performance. These findings indicate that in a more trustworthy marketplace, where more customers and investors are likely to engage, firms—particularly those struggling to attract customers and investors—place greater value on rank-and-file employees and increase their income share. This behavior fosters employee reciprocity, leading to improved firm performance.
KW - Business environment
KW - Income share
KW - Rank-and-file employee
KW - Trust
UR - http://www.scopus.com/inward/record.url?scp=105001584173&partnerID=8YFLogxK
U2 - 10.1016/j.irfa.2025.104201
DO - 10.1016/j.irfa.2025.104201
M3 - Article
SN - 1057-5219
VL - 103
JO - International Review of Financial Analysis
JF - International Review of Financial Analysis
M1 - 104201
ER -